Rules To Shed Light On Mutual Funds

HOUSTON -- Starting Thursday, you will be able to learn more about the people who manage your mutual fund.

New rules established by the Securities and Exchange Commission will require mutual funds to list the names and backgrounds of their key portfolio managers.

Funds also will have to offer a chart showing how they performed against a broad-based market index, such as the Standard & Poor`s 500 index, and tell you why they scored or failed miserably in their results.

It`s about time. Until now, people who have been selling themselves as professional money managers have been asking you to trust them with your money without giving you much information about themselves to go on.

``They`re going to have to discuss the strategies that affect their performance during the past year in a prospectus or annual report, and that`s something that a lot of funds are not doing right now,`` said Amy Arnott, an analyst at Morningstar Mutual Funds, a Chicago newsletter that follows mutual funds.

Investors who wrote the SEC are hungry for the information.

``Many investors wrote that they did not believe mutual funds currently provide sufficient information to permit investors readily to evaluate fund investment results,`` the SEC said in a report.

Under the new rules, funds will be required to update their prospectuses -- the brochures they send out to new investors that outline the fund`s investment goal and costs -- to disclose material changes that affect investors.

If there is a change in a fund`s portfolio manager, it will be disclosed in a prospectus supplement filed with the SEC and delivered to investors.

Even then, you may not be able to get the information you need.

Money market and index funds will be exempt from the rules. That`s because the managers have a lot of leeway in deciding how a fund invests.

Managers of money market funds don`t have many teeth when it comes to making investment picks because the SEC requires them to make short-term, low-risk investments.

An index fund`s job is to replicate the performance of a market index. It`s supposed to be a no-brainer as far as the money manager is concerned.

``In money market and index funds, you become sort of like an administrator, rather than possibly some brooding genius making your own decisions,`` said John Collins, spokesman at the Investment Company Institute, the trade group for mutual funds.